For Synovus Financial Corp.SNV-0.06%, that means cutting jobs. The bank said last week it would eliminate 850 jobs, 13% of its staff, and close 39 branches to save $100 million in expenses a year.

ENLARGE

State Street Corp.STT-0.76% reiterated Wednesday that it is on track to save as much as $625 million in expenses through 1,400 job cuts to be completed this year. Barclays Capital laid off 600 employees world-wide earlier this year.

Many banks are struggling to put their bad loans behind them, adjust to a raft of costly regulations and increase revenue in challenging economic conditions.

It all amounts to cost cutting. Analysts expect banks will reduce operating costs by as much as 20% over the next three years. Compared with the third quarter of 2007, profits of all U.S. banks in the third quarter of 2010 were still down nearly 48%; employment is down 9% to 2.04 million jobs from 2.22 million in the fall of 2007, according to the Federal Deposit Insurance Corp.

Especially at weaker banks, “the only meaningful way to cut expenses is to cut jobs,” said bank analyst Gerard Cassidy of RBC Capital Markets. He estimates that 75% of expense cuts will be head-count reductions. “Candidly, I [already] expected more announcements” like the one from Synovus, Mr. Cassidy said.

Some banks, such as J.P. Morgan ChaseJPM-0.74% & Co. and Wells Fargo, emerged from the crisis bigger than ever and may continue to grow. Citigroup Inc.,C-0.71% the most troubled among the surviving big banks, this week said it had expanded its work force by 2,000 employees in the fourth quarter. Even smaller banks say they want adequate staff to grow.

But some analysts think revenue growth rates may never return to precrisis levels. That means bankers will have to focus on cost cutting more seriously than they have in the past.

“In the next five years, there will be anemic growth for all but the winners. I think [bankers] haven’t fully come to terms with the harsh reality,” said Laurent Desmangles, retail banking consultant at Boston Consulting Group Inc.

For many banks, that reality means a struggle to improve their efficiency ratios, expenses as a percentage of revenue. Typically, a healthy ratio should hover around 50%. In the throes of the financial crisis in December 2008, efficiency ratios averaged 65%. As of September of last year, that ratio was 57%, according to the FDIC.

Lending growth is still relatively sluggish, and new laws limit bank fees, so the only way to improve the ratio is to lower costs. Yet some banks’ efficiency ratios remain stubbornly high. Fifth Third, for example, has long been known for its tight expense management, but its efficiency ratio was 63% in the fourth quarter.

Chief Financial Officer Daniel Poston said he expects to get it “back into the 50s,” where it was before the financial crisis. At Fifth Third, that ratio had climbed to more than 70% during the crisis.

“Our bias right now would not be for extensive cost cutting,” Mr. Poston said. Instead, Fifth Third wants to take market share and take advantage of the recovering economy, he said. “We will continue to focus on efficiencies, but it probably wouldn’t manifest itself in a head-count reduction that has a big headline associated with it.”

In the wake of the financial crisis, banks were keenly focused on survival and trying to maintain or restore capital. Costs weren’t the primary focus. Now they are.

“There is a lot to be done, across the board,” in expense management, said James Rohr, chief executive of PNC Financial Services Group. “We’ll take another round of costs out,” he said. But Mr. Rohr was quick to add that job cuts won’t be a major factor at his Pittsburgh bank. Consolidating real estate alone can save millions, he said.

American Express Co.AXP-0.08%, for example, is consolidating call centers, which it expects will save $70 million a year. The company said it doesn’t need as many call centers anymore because customers use their credit cards less and go online rather than call in.

But the move will also affect 3,500 employees from North Carolina to Madrid and Sydney. The card lender said it would eliminate 550 positions and offer relocation packages for others. But its total head count might not shrink, because it is hiring in other areas, like technology.

Wells Fargo has cut about $5 billion in expenses since the acquisition of Wachovia Corp. in early 2009. “What we are really trying to do now is taking the next step, and make sure our processes are as streamlined as possible, and be more competitive,” Chief Financial Officer Howard Atkins said. “I don’t think there will be any branch closings, but there could be staff reductions.”

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